Good News – Americans Are Having more Babies, OCEAN RATES NEAR PRE-COVID LEVELS, THE U.S. DOLLAR IS STRONG, AND THAT’S A PROBLEM
The toy industry depends upon a continuously renewing child population. Therefore,
I closely follow birth rate data in the U.S. and other countries. The decline in births has been going on for decades. More recently, experts speculated that the Covid quarantines would reduce American births from 500,00 to 600,00 births.
Surprisingly, we are now being told that rather than causing a decrease in births, the Covid quarantines contributed to an increase. I found that information in a white paper prepared by the National Bureau of Economic Research.
The paper, “The Covid-19 Baby Bump: The Unexpected Increase In U.S. Fertility Rates In Response To The Pandemic” describes the unexpected rise in births this way:
The COVID pandemic resulted in a small “baby bump” among U.S.-born mothers. The 2021 baby bump is the first major reversal in declining U.S. fertility rates since 2007 and was most pronounced for first births and women under age 25, which suggests the pandemic led some women to start their families earlier. Above age 25, the baby bump was also pronounced for women ages 30-34 and women with a college education, who were more likely to benefit from working from home.“THE COVID-19 BABY BUMP: THE UNEXPECTED INCREASE IN U.S. FERTILITY RATES N RESPONSE TO THE PANDEMIC,” Martha J. Bailey, Janet Currie, Hannes Schwandt, National Bureau of Economic Research
Bottom line, instead of fewer children, we are going to have more. That’s good news. Plan accordingly.
OCEAN FREIGHT RATES ARE NEARING PRE-COVID PRICES
Ocean freight rates from China to the American west coast rose as high as $20,586. As reported by the Washington Post, “Ocean freight rates are down, so why aren’t prices on shelves dropping?” that was 15 times the of a container before the pandemic. The price now appears to be cratering at $2,720 as of last Friday.
The below graph, prepared by Jaclyn Peiser of the Washington Post and based on data from THE Freightos Baltic Index, does a particularly illuminating job of tracking the price of a container over the last two years. Based on what I am reading, freight rates will stay there for a while.
Based upon what I am reading, freight rates are going stay there for a while. So, kudos to the toy industry for surviving such a roller coaster ride.
THE U.S. DOLLAR IS STRONG; THAT’S A PROBLEM
If you are an American, it’s easy to want to cheer when the dollar is strong. It means your money will go a lot farther when you visit the U.K. or Europe.
It also makes imports more enticing because the stronger the dollar, the cheaper the cost. For example, today, October 20, 2022, you can exchange $1,000 U.S. for 7215 Chinese Yuan. One year ago, when the dollar was weaker against the Yuan, you could exchange $1,000 U.S. for 6,394 Chinese Yuan. That comes to a 13% increase in the dollar value, which means you should be able to manufacture 13% more toys for the same dollar price.
That is good news for U.S. companies that manufacture and import from China. It is bad news for those looking to reshore manufacturing.
Wall Street Journal writer, Bob Tita, in his article ” explains it this way: “Strong Dollar Pressures U.S. Manufacturing Rebound,”
Foreign companies, meanwhile, are gaining a price advantage on exports to the U.S. at a time when U.S. companies have been adding production. Advocates for U.S. manufacturing said they worry that American manufacturers will become less willing to invest in domestic operations if corporate profits get squeezed by a stronger dollar. At the same time, foreign companies will find it easier to sell their products to U.S. buyers.
With the stock market resembling a roller coaster ride at a cheap amusement park, the threat of a recession, and the current strength of the dollar, it might be a time to put any major plans on hold.